Tod's' full-year net profit slumped to €47.1 million in 2018 from €71.0 million a year earlier, while sales fell by 2.4 percent to €940.5 million, prompting the group to cut its dividend to €1.00 per share from €1.40.

The Italian group posted Ebitda of €118.3 million for last year, down from €160.5 million in the previous one, due to higher communication and marketing expenses and the strengthening of its design team. Ebit shrank to €71.8 million from €111.8 million, missing market expectations by about 8 percent. The Ebitda margin narrowed to 12.6 percent from 16.7 percent in 2017, and the Ebit margin dwindled to 7.6 percent from 11.6 percent.

Operating costs rose to €831.9 million from €822.2 million, and investments grew to €44.0 million from €36.6 million, largely due to the expansion and refurbishment of the group's network of directly-operated stores.

The operating working capital bloated to €314.4 million from €261.3 million, or 33.4 percent of sales against 27.1 percent. The cash burn increased to €32.4 million in 2018 from €6.3 million in the previous year and net debt stood at €75.3 million at the end of 2018 against a cash pile of €9.3 million 12 months earlier.

As we have already reported, same-store sales fell by 5 percent in the last quarter of 2018, worsening particularly in Italy and the rest of Europe, despite an increase in Greater China. They were off by 3.0 percent for the full year. Comparable store sales had improved in the third quarter, and the management had predicted that the trend would continue (see Shoe Intelligence Vol. 21 N° 3+4 of Feb. 9).

Tod's said that same-store sales are likely to have been negative in the first quarter of 2019, but mentioned an “encouraging start” for its spring/summer collections. The management added that market projections of a 3 percent sales increase in 2019 are reasonable. The top line is expected to be underpinned by positive comparable sales and a 3 percent increase in floor space, offsetting a negative trend at the wholesale level.

Equita was less optimistic, seeing sales up by 1 percent, with comparable sales flat. The broker also sees 2019 Ebitda at €117 million compared with a consensus of €130 million.